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What Is The Real Cost of Car Ownership?

Shirel Berchowitz Updated: March 27, 2024 • 6 min read
modern car outside of American home

Key Points:

  • Knowing the cost of owning a car is crucial for financial planning and avoiding unexpected expenses.

  • Recognizing these expenses is essential for making an informed decision about car ownership and ensuring it fits within your budget over the long term.

  • Here's some help understanding the total cost of a car to avoid surprises down the road.

Understanding the cost of owning a car is crucial for financial planning and avoiding unexpected expenses. Many potential car owners focus primarily on the purchase price, overlooking the additional costs accumulated over time. These include insurance premiums, maintenance fees, fuel costs, and depreciation. Identifying these expenses is essential for making an informed decision about car ownership and ensuring it fits within your budget over the long term. This awareness helps manage finances more effectively and avoid surprises down the road.

Understanding the cost of owning a car is crucial for financial planning and avoiding unexpected expenses.

How Much Does It Cost to Own a Car?

The cost of owning a car extends far beyond its sticker price, encompassing a variety of expenses that can significantly impact your budget. These costs can vary widely depending on several factors, including the make and model of the car, its age, your driving habits, and even where you live. On average, the annual cost of owning and operating a new vehicle can range from $9,000 to $10,000, according to the American Automobile Association (AAA).

This estimate includes the monthly car payments, insurance premiums, fuel expenses, regular maintenance, and depreciation. However, it's important to note that this is just an average.

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Average Monthly Cost of Owning a Car

The average monthly car cost can be a moving target, influenced by various factors that make each owner's experience unique. Generally, the monthly cost can range significantly when considering the purchase price, insurance, maintenance, fuel, and other miscellaneous expenses. On average, car owners might expect to spend anywhere from $750 to $1,200 monthly. This broad range accounts for the diversity in vehicle choices, from economical compact cars to luxury SUVs, as well as differences in driving habits and local cost variations.

  • Location: Where you live affects costs. Urban areas have lower fuel costs but higher insurance and parking fees. Rural areas have lower insurance rates but higher fuel costs.
  • Car Type: Your car's make and model affect your monthly expenses. Luxury cars are expensive to buy and maintain, with higher insurance premiums. Electric cars have high upfront costs but save money on fuel and maintenance in the long run.
  • Usage: The more you drive, the higher your costs for fuel, maintenance, and potentially insurance. High mileage can also accelerate depreciation, affecting the car's resale value.

Potential and current car owners must consider these variables when budgeting for a vehicle. By understanding how these factors interact, you can better anticipate your monthly costs and make more informed decisions about car ownership.

Costs Associated With Car Ownership

Owning a car involves various costs, some of which are upfront and others accrue over time. Understanding these expenses is crucial for budgeting and ensuring that car ownership fits within your financial means. Here are the key costs associated with car ownership:

Insurance Premiums

Insurance premiums are a significant ongoing cost for car owners. The amount you'll pay depends on the car's make and model, your driving history, location, and the type of coverage you choose. Premiums can vary widely, with average costs ranging from $1,000 to over $2,000 annually.

Purchase Price and Financing

The purchase price of the car is the most apparent cost. The price can range significantly based on the vehicle's brand, model, and features, whether new or used. Financing increases the cost through interest payments if you don't pay for the car outright. The total interest paid over the life of the loan depends on the APR (Annual Percentage Rate), loan term, and loan amount.

Gas Price

Fuel costs can fluctuate based on the vehicle's fuel efficiency, the fuel type required (regular, premium, diesel, or electricity), and how much you drive. Fuel efficiency is often critical for buyers looking to minimize operational costs.


Registration fees and taxes are required to operate your vehicle legally on public roads. These costs can vary by state or country and may include an annual registration fee, emissions testing fees, and property taxes based on the vehicle's value.


Regular maintenance is necessary to keep a car running smoothly and safely. This category includes oil changes, tire rotations, brake pad replacements, and other routine services. Additionally, unexpected repairs can arise, potentially adding significant costs.


Depreciation is the loss in value of your car over time. New cars depreciate the most rapidly in the first few years of ownership. While not an out-of-pocket expense, depreciation affects the car's resale or trade-in value, impacting the overall cost of ownership.

Each of these factors contributes to the total cost of owning a car, and the impact of each can vary widely based on individual circumstances. By carefully considering these costs, prospective car owners can make more informed decisions and select a vehicle that aligns with their budget and lifestyle needs.

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How to Calculate the Total Cost of Car Ownership

You can use a total monthly car cost calculator online to simplify the process. These calculators often require inputs like the purchase price, down payment, loan terms, fuel efficiency, and average miles driven. They automatically estimate your monthly and annual costs, including depreciation and financing charges.

Add up all these costs and divide by the months you plan to own the car to get a monthly average. This will give you a comprehensive view of what to expect in terms of total car ownership costs, helping you make informed financial decisions.

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How to Save on Your Car Expenses

If you’re over your car budget or want to reduce spending, look at your big-ticket items first and work through costs you can control.

Saving on car ownership costs is crucial for maintaining your budget and ensuring that your vehicle doesn't become a financial burden. Here are some strategies to help you reduce the major expenses associated with owning a car:

  1. Refinance Your Car Loan: If interest rates have dropped or your credit score has improved since taking out your original car loan, refinancing could be smart. A lower interest rate means lower monthly payments, which can significantly reduce the total cost of owning your car over time.
  2. Shop Around for Better Rates: Don't settle for the first insurance quote you receive. Prices can vary significantly between providers, so getting quotes from multiple insurance companies pays.
  3. Ask for Discounts: Many insurers offer discounts for safe driving, multiple vehicles, anti-theft devices, and more. Ensure you're taking advantage of any discounts you're eligible for.
  4. Increase Your Deductible: If you're willing to pay more out of pocket in the event of a claim, you can lower your premiums by increasing your deductible. Make sure you have enough savings to cover the higher deductible if needed.
  5. Use Gas Price Apps: Apps like GasBuddy can help you find the lowest gas prices in your area, leading to significant savings over time, especially if you drive frequently.
  6. Fuel Rewards Credit Cards: Some credit cards offer cash back or points for fuel purchases. Using one of these cards can help offset the cost of gas.
  7. Regular Maintenance: Keeping up with your car's maintenance schedule can prevent costly repairs. Simple tasks like regular oil changes, tire rotations, and brake inspections can extend the life of your car and save money.
  8. DIY Minor Repairs and Maintenance: Learn to perform basic maintenance tasks and repairs yourself. Numerous online tutorials can guide you through simple procedures like changing your oil, replacing air filters, and more.
  9. Buy Used: Cars lose value the fastest in the first few years. Buying a car that's a few years old can save you a lot of money in depreciation costs.
  10. Maintain Your Car's Value: Keeping your car in good condition, both mechanically and cosmetically, can help it retain more of its value over time.

Focusing on these key areas can significantly reduce the total cost of owning a car. It's all about being proactive, shopping smart, and making informed decisions that align with your financial goals.


 By employing strategies to reduce car expenses, such as refinancing your car loan, shopping around for insurance, using gas price apps, and maintaining your vehicle properly, you can significantly lower the overall car cost. Remember, every dollar saved on these expenses is a dollar that can be used towards your other financial goals. Being informed and proactive about the costs associated with car ownership will save you money and enhance your overall ownership experience.



What are the main costs associated with owning a car?

Purchase price or financing costs, insurance premiums, fuel expenses, registration and taxes, maintenance and repairs, and depreciation make up the majority of the costs.

How can refinancing my car loan save me money?

If you qualify for a lower interest rate than what you're currently paying, refinancing can reduce your monthly payments and the total interest paid over the life of the loan.

What maintenance tasks are essential for reducing the total cost of the car?

Regular maintenance tasks include oil changes, tire rotations, brake inspections, and replacing air filters. Keeping up with these tasks can prevent more costly repairs down the line.